From firefighter to a landlord with multi-millions of dollars in Revenue Operating a property management business and many different horizontal and vertically integrated businesses, this is a video that you want to watch if you want to see how to go from W2 job to becoming an investor and an entrepreneur. But also if you're interested in where to make money in real estate, here's how Peter is figuring out how to make more money with real estate? Let's go. Welcome back to another episode of the Meet Kevin show Today we have Peter of Rencon Property Management here now. What's amazing with Peter's story is that and I want you to tell the story but let's just put it this way.

you went from fire captain to the best property manager I've ever seen in the world and you're a real estate investor and you're a father of three. You got to fill, fill, fill in here. How did this all start? Because it's really inspiring. It's really amazing.

Wow yeah I don't feel like I I live up to all that. but um so I'll give you the quick version so we can talk about some other stuff but so worked for the fire department. Figured out quickly that like you know I needed to have an alternate income Source passive income real estate just because you hit sort of a ceiling of of like what you could make even working hour time ranking I think it had more to do with like I've always been kind of a serial entrepreneur okay and working for the government was a little challenging right for from the perspective of I like to do my own thing and control versus bureaucracy. Yeah, and and you know when you're young and you're like oh, the fire department, be a firefighter that'd be super cool and and it was.

And it was a great job. but eventually like the the entrepreneur side of me was like okay, this is interesting fun I don't know if I want to be here for 30 years doing this type of a thing. So a captain? Yeah, yeah yeah over yeah I did. Which? I mean I Don't knock the fire department, it's a great job, great career, great bunch of people, but just ultimately didn't suit where I was going.

so personality wise like you had to have that that entrepreneurial? Outlet Exactly yeah and you were doing both for a while. you started your entrepreneurial side hustles while you were at the fire dep. Oh absolutely yeah. yeah.

So the the first thing I did was I started investing in real estate out of state real estate. oh where' you buy? Nashville Toledo a little town called Bonner Springs in Kansas wow and then a a little town in Texas called new Browns and how was that? I made a ton of mistakes. Yeah so no, no, it was good I got to hear about these I mean I I wouldn't change it for for a minute but I'll back two steps up The reason that I So I initially bought a house here in Ventura a new house over at off telephone. okay in addition to my house that I was in cuz um it was pre2 2007 right? and it was like oh you can't go wrong here.

Interesting bought the house, rented it out to a friend um which is how I figured out I didn't like property management companies because I was you know trying to with them and they're terrible ex yours anyway just by luck. So sold it literally right before the crash and the reason that I sold it was my wife was a teacher. we were having our first baby and I didn't want her to have to work I wanted her to be able to stay home and raise the kids. So I'm like well okay, this isn't going to work I can't I need to create an alternate income Source if this is going to work So that's why I sold the house in Ventura leveraged it overleveraged it into I think 10 or 11 units um in multiple markets which was a mistake for sure.

oh my God in the hopes that I would produce cash flow to to to keep her at home or start to go down that Journey well it was all good until the Great Recession hit which literally like as I was closing these properties like the market was turning and uh def I held on I didn't like go bankrupt or or lose it all but I mean it stopped me from like my forward progress because I was hanging on on the whole way down versus buying more like I compare it to another firefighter I know who started real estate investing right after the Great Recession wow and he never stopped and he's He also has since left the fire department early but he has you know, a ton of units and just a difference in timing and then that's not why he was successful and why I wasn't but just two different scenarios and so anyway, long story short, that's what got me into real estate. If was it useful to have that firefighter salary that W2 to buy your real estate? So absolutely it I mean well and then having the firefighter salary and starting a business is an incredible opportunity because I literally started a business that I did not rely on at all. like whether it made money, lost money, it didn't matter. Wow cuz I had my I My Lifestyle was set up on my firefighter salary so it was all house money essentially right and any deal you closed so to speak was just bonus money at your new business.

Which is great because I feel like sometimes you work with real estate agents and that's their only income and maybe they're newer or they're having a hard time or whatever. but you can almost sometimes feel when there's like blood in the water it's like I need I I need to close this deal. And when I feel like when you get into that mindset, it's really hard to actually close deals like other people notice. like desperation, they on you.

Yes, where when you're in that situation you described I wonder if that actually not only makes it less stressful for you to actually start a side Hustle but to actually probably makes it easier for you to succeed in that side hustle? Well, it was a competitive Advantage other people didn't have the luxury I had which is they needed to make money. They maybe were desperate. maybe they needed to close those deals where I didn't and then I it allowed me also to like go undercut the market like I started the management company vastly priced way below my compe editors which in hindsight I don't think was the best idea. but it is what it is.

but I was able to do that only because I didn't need to make money in the beginning right? which is not normal like? that's not how most businesses start or are you know, small entrepreneurial Hustler type businesses. So yeah, no kidding, you're usually trying to get every penny together just to survive of the business, just to pay rent or mortgage or whatever. So that so yeah, that was in 200, 12 or 14. That's when you started your management business when I started the management business, real estate sales I didn't know anything about I mean I was young and dumb and had no idea really.

what? like I don't know like I don't have a good answer. Do you think in hindsight you would have gone sales and management? Maybe? or just or you like management. So part of the strategy with management only was to entice Realtors to refer to their clients to us. This did that work.

Yes and no. This is a hotly debated thing in the property management industry. Like you should have sales. You shouldn't have sales.

It depends on where your clients are coming from I think I think if I had to do it all over again I probably would have done sales sooner and and sales is possibly on the horizon in the future I Just currently don't do it now. we have referral partners and like if I go start selling I'm basically going to blow up those relationships kind of right. Which there's a risk of that at least yeah or the yeah if you don't delicately like maneuver the best way I mean you know you were in the business people. property management companies steal listings from Realtors Well of course I mean the seller just by default is dealing with the manager all the time.

and so when they need to sell, the first thing is, when's that lease up? Yeah, oh why are you asking? Oh, thinking about selling? Well yeah, exactly exactly. Why don't I help you with that Yeah, yeah, Yeah I mean that's but then then you wonder, uh, is that is that Also strategically a you know a 10x Revenue opportunity I Don't know. So the argument in the industry is you're foolish for not selling so you can still keep your integrity and protect your referral relationship. Don't take those listings but you're giving up so much money.

Yeah, by not selling? Sure because I mean if if you make you know 150 bucks a month on on a property, uh, for property management, you've got to manage the thing for like 10 to 15 years to compare to a commission check. Yeah, and then I mean we there're still we get a referral fee but it's not the same. So then I was negotiating like better referral fees that I could pull off which was helping. Yeah um so I guess it? it depends.

it's just the reality is is like where are you going to focus your efforts in your business? You can't do it all. Yeah you have. and then you just like laser focus on something, tell tell you wire it and then go to the next thing and the next thing and oh that's an interesting phrase until you wire it. So do you feel like you've wired your property management business? So the property management business I don't want to say runs completely on its own.

but I almost feel like I'm not needed there most of the time right? So like we have a leadership team. we have. How many people we have now? 13? Yeah, 13 13 and half of them are remote. How many properties you managing coming up on 400? Wow.

I Remember back when it was you and one person in that old office? Yeah in that little closet office that we had? Yeah, I mean it was like 80 square feet? Yeah, literally. that's amazing though. my closet was bigger that because that's actually so cool like that's that's so inspiring Because it's like here working at fire department you're starting. Start small.

Uh, hire one person. you. You grew to 13 people in 400 properties. Yeah.

and so I mean my other strategy is, well, let me back to your question. The management company is dialed, There's workflows and Automation and processes. and AI a little bit we have sales marketing. We have all the functions of a business and it pretty much runs like a top.

Like, doesn't mean there's not problems occasionally for sure are, but it doesn't take all my attention. My strategy Now it I'm basically vertically integrating all the other businesses that surround. Property Management So what else? Two years ago we started a Contracting Company No, which I know you had a rough rough? Go with no Okay, you have to tell me about this. Yeah, so it's called Quick Turn Maintenance.

It's a license licensed contractor. Uh, we have two uh on staff, handyman, technicians and then we sub out the stuff that we don't do. Is this for your property management? correct? Are you doing remodels for other people not currently? Okay, Yeah, that's that's the danger spot. Yeah.

so so we so the contracting business survives on our portfolio that we already managed. ESS We are the only customer of the Contra that's great. That is actually a very delicious style of like Contracting Because now you can do. You could have uh, the correct workers's comp.

You could have the correct insurances, the general liability insurances. You could pull the permits when you need them. You could do the work you need to do. Finding great handy folks.

that's hard. So having that is a good Edge Yeah and they I mean it's all about control, right? Construction people are. they're difficult. It's a different breed of people as you know.

Um, so that so we're doing that. And it's funny. You say that because like we've again for like the first two years, worked out our systems and processes, made sure we had it all kind of figured out. Yeah.

I Am anticipating turning around and facing the public. Yes, not like Joe homeowner who wants to call to have his toilet fixed, but more like other property management companies or our realtor referral partners that we potentially could do some work for. So you're shaking your head. Let's hear it.

Let's hear it. Let's hear it. If you're going to go do in my opinion the the like oh we'll do this remodel for you. You got to go expensive So we're not cheap.

We're actually really expensive. Yeah. but I don't think then you're going to get like the Realtors and the maintenance people who want to hire you. Oh gotcha.

Yeah that would be the the risk there because you know how it is with Realtors if it's not done today, they're pissed at you and that that's that's almost more risky for Brand in my opinion. Could be wrong here. But I think if you can. If you you know have a you know sort of a briefcase contract thing where where you become this hey well we'll do your $80,000 kitchen and bathroom remodel.

There's so much extra margin in there that you could sub stuff out a lot of stuff. you could sub it out, have your people fill in or coordinate the job. That's where you can make extra money going toing uh you know the maintenance for the Realtor That makes me nervous. You mean like little like here's the two three item punch list and it needs to be done in two hours.

Is that what you're like Yeah I mean I guess I guess Are you trying to create it as a loss leader to get them to use you for property management? No no no. So couple things when we say we're not doing like like if you called and said hey I want a brand new kitchen we would say no, right? Because right now you're maintenance right? We're doing rental well even if we were facing the public. I'm not going to like build houses or additions or major remodels, We're doing rental flips right. We're doing floors, paint, countertops, light fixtures, pling fixtures, the easy the stuff that you preach about on your YouTube channel back in the day.

that's all we're doing so I'm not getting out of like I don't want to step outside of that cuz I don't know that like I'm not an expert in that I'll I'll get eaten for lunch for sure if I go against some contractor that does full remodels every day like no interest in that, we're going to do basically what we do on our properties okay for other landlords and rent and and management companies I wonder if you can make money in that these people are so fussy I would be just very cautious. That's all I would say because the it's It's so amazing because on one hand, when when you do a rental renovation for one of your landlords and you're like look, it was a hoarder house, it was a disaster. You know, horrible tenant or whatever they come to you, they're like I need a professional to do this and then you go do the rental grade renovation and then they go in. It's like oh my gosh the transformation.

It was this inexpensive. This is great. Uh that I think is such a wonderful thing. When they're your clients and you have the full control, you're making all the decisions.

What drove me nuts was as soon as it went from I'm making the decisions to somebody else's like well I think the rental needs brass hardware instead and it's my rental and I'm managing it right that that was the hard part I have to. We'll have to figure that out because we hav come across a lot of that cuz we're mainly just taking care of our own right now. but yes and that is great. Like I'm so happy to hear that you have your own control, Control and Construction Fantastic controls everything.

Oh my gosh even I mean we I do I am doing the construction stuff to make a profit but there are plenty of people who in the industry who don't. They just do it to control the process and they break even on it and they're happy with that. are are you are you positive on it right? Yeah yeah oh that's great. Yeah.

I mean we're not making a ton of money like we. We have a lot of room for impr 10 bucks an hour on on the guys that you're hiring. Now you have a a part. you have a this subsidiary business that basically makes all of your other management business way easier like your job inten.

intensity just plummeted. This is why why we have you know in-house uh uh Contracting uh for contractors as well because you can't do it without having I feel like some people on payroll that could just go do that one freaking light fixture and I need it done today. You know it's hard to have leverage over these Subs if you're not like especially if you don't give them a ton of work like our main Subs I feel like we have leverage over but push comes to shove I can't tell them what to do our own internal people totally different that's and and if you can get that for free because basically you're you're charging a you a small premium for the the people that are you know essentially your your clients, your landlord clients. That's fantastic.

It's better for them, it lets you keep your management cost more effective. it it runs the business witho it I Love that. yeah it's a good idea so that so that that's two years old I'm rolling out another company. so basically I'm using the the management company has like this economic engine and we love this.

The best part about I would say this owning real estate is is number one. If you can own the real estate, that's the best thing. Okay the second best thing is controlling the real estate right? Yes! I Love this. So the management company essentially controls all the properties we manage.

Of course we pick what vendors go there. We pick what insurance the tenants get. We pick all the things we control. So oh, you pick the tenants insurance.

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Learn more about what we're doing, how we hope to make cash flow and grow the business. All of the Fantastic things that we're doing with this company go to House.com to learn more and how you can invest with credit card debit card a whatever is most convenient for you. We have a master renters policy a master policy So In theory we can't like make them take it but probably 80% of them take it cuz we Master renters policy. Oh tell me about that.

So we actually it's wrapped up in this what we call a resident benefit package which is I've seen you sell that yeah which is like a sweet of stuff but everyone, no one, every landlord says the same thing. you can't live in my property without renters insurance right? That's like sure com like base I Don't know what I'm trying to say but it's it's like everybody reques bare minimum. Yeah the reality is though, people will buy the policy to move in CU they know they have To and landlord kind of comp it. could cancel the policy.

No one knows, not whatever. So we that's bad. That's bad for the landlord, bad for the management company. Here's my certification.

cancel at the next month. Yeah so and the and most of the policies that they're buying are garbage. So we have a master renters policy that actually has better coverage. So I think our like uh personal property coverage is $30,000 which uh anyway long story short, we control the process.

If you say heyy I don't want your master policy I'm going to use my own. We go great and this is all done by a third party. By the way you here's the here's the email that you have to send your policy to. You need to add this these people as uh, additional interest and that this company basically does all the compliance.

So anytime somebody drops their policy we're notified and we automatically enroll them in the master policy. And that's how we keep our people. We had keep our our clients protected. How much Dr off do you see when people have their own? Is it just all the time people are chopping out of compliance? Basically no.

Well now that they know we're monitoring it I would say it doesn't happen that often but prior to that you have no way of knowing. We had a we had a a structure fire in a house which thank back when I was at the fire department. Thankfully I wasn't working because it would have been in our area which would have been really weird for that would be a little awkward. I Manage this property guys a little faster please.

Anyway, uh structure fire. They had a candle. they burned up the like the living living room, the kitchen. Like pretty serious is always candles.

Not at most a lot of the time. Candles are food on the stove, fireplaces, food on the stove. They just forget it's cooking. forget it or they're like deep frying something and they don't.

It overflows and starts a fire and they can't figure out how to put it out. But anyway we burn these tents, burned up this house and uh they. We had the renters insurance and most renters insurance policies come with like a $100,000 liability portion of it that protects the landlord right? So basically the that it was it was under $100,000 but the owner didn't wasn't out of pocket anything. didn't have to pay deductible nothing.

They got a brand new house and they got a brand new house so see isn't that great. Is the insurance great? It is when it pay when they pay for sure they got a lot of pay with relationship. I mean everybody does like when they pay it's like phenomenal. Like I had a I had a sewer backed up and it like it it it.

Basically I mean we had to completely gut a bathroom and and replace the sewer under the bathroom and basically redo the entire bathroom that was just remodeled. Uh but the because the sewer backed up and caused drywall damage, they covered everything. So I got a brand spanking new bathroom and the sewer repair for like two grand deductible. Well I mean a perfect example is all those homes we burned down in Thomas Fire Like oh my gosh Gor! As long as nobody died, that was possibly the best thing that could have ever happened to those.

I don't think any homeowner died. There was one which is horrible. There's a firefighter killed the firefighter uh Iverson out in Filmore and that wasn't in a house that was out in, it was out in the woods. Yeah, yeah, yeah, yeah.

so but other than that, all of those folks I mean some were woefully underinsured, but these are like Mansions Now they came out ahead. They absolutely came out ahead czy for sure. Anyway I do want your opinion? So yeah yeah, back to this insurance. Well we can move off that unless you want to keep talking about that.

oh your property, your structure here. Yeah! so we got quick maintenance. We've got resident benefit package. What else is in that oh the benefit package.

Yeah, doesn't that have like filter changes too? It does. Yeah, we'll ship the filters Does that? No, so that's that's run by a third party. Another third party. Well, so the third party like manages that Resident benefit package for us.

essentially. Oh, the whole package. Almost why you do it I Did originally really? and uh, we could. They could do it better.

No way. And we make more. Having them do it. Can you shout that company out? Second nature? Second nature? Yeah, look up.

They only work with professional property management companies, but they manage these resident benefit package essentially. it's a suite of services that it's like a concierge for tenants. So that whole thing like we take care of our tenants. We treat them really well.

This is right in line with that. Like there's a concierge utility transfer service that they call one number and it transfers all their utilities. Like this company will chase down all the nonsense when it comes to that. There's that's such a hassle.

Rewards for like paying your rent on time. there's you know will more options for movein. Like if you want to move in with a lock box at 7 o' at night on a Saturday we can make that happen for you like things like that. W Anyway, back to this model.

The next company that I'm currently in the process of spinning off is a cleaning company which obviously cleaning Very unsexy. You have a cleaning company right now so it's and you're going to spin it off. It's a DBA of my Contracting Company currently but the the goal is eventually to spin it off and have it independent. So it's cleaning our properties which is like the EAS That's nothing exciting about that.

but where I'm what I'm doing with it is and this is where I'm interested in your opinion. Yeah is getting into the short term space? Yeah. So I mean knew where this was going. Every every cleaner wants to do Airbnb cleanings right because it's obvious it's there's a lot of them.

They happen over and over. It's repeat, the guests pay the bill I Feel like the best type of of uh cleaning gig is not that gig where they call you once a year and it's like to clean. It's like I'll be here for five minutes on this one spot. You know, like the best kind of clean is you're there every week or twice a week and it's like clean.

Yes, so that's but that's not the that's in my mind. not where the opportunity is. So what? what is a professional short-term management company charge? Oh my gosh, 30 40% Okay, a lot right? Yeah, this is called it. 30% and if you're out of the area, oh 50 Yeah Well I mean if you're out of the area, you don't really have a choice like you either.

you either married to your phone and having to chase down all these vendors job. It's a job people. Forget that short-term rentals are the job you know I See, like on social media it's so common. People are like oh I make $200,000 from social media for from uh, short-term rentals.

It's like okay, we working 90 hours a week being the concierge. Yeah, so if you don't want a job, but you still want to have a short-term rental, you have to put a management company in place who's going to take 30 or 40% of the revenue right? What I am going to do is bundle up the services we already do. handyman inspections, cleanings. You have an inspection service that hand part of hand part of what we already do.

uh and make this into a subscription model model and Market it to short-term rental owners. So I'm going to allow them to fire their management company. Oh you evil bastard. So so they can fire their management company, they can.

It's 100 bucks a month and that doesn't come with it that just belongs to our little conglomerate of services that we're going to offer you. You still pay for the cleaning, you still pay for the maintenance, all the stuff. For $100 a month you have one point of contact which is my company. We do all of the boots on the ground so you can live wherever you live and have your short-term rental on the beach, fire your management company, Then the only thing you have to do is manage the guest experience which there's a ton of software that makes that a lot easier.

Interesting. So what do you favorites as far as the softwares I don't I don't actually have any. Not at this point? got it? That's fine. That's fine.

it's a developing idea. Okay, well so no I mean I'm I'm probably about a month away from rolling this out to short-term people. I Already the cleaning company already is cleaning properties. How many people do you have in your cleaning biz? None.

So the yeah I mean other than the people on my team already, there's no like I don't even have a full-time cleaner employee. But it's okay I have all these Subs that do Allan it out for now for now people that we have relationships with already at the at the management company right? So I'm literally rebundling Services we already provide exactly and offering it to. It's not going to for every short-term rental owner but the ones that have a real like be in their Bonnet about paying 40% of their money to a management company who then the management company does a terrible job of course yeah who. they can then solely focus on making that guest experience good Getting the reviews all the things that you got to do own you're removing all the pain is what you're doing well a lot of the pain they they could deal with the customers is what you're saying.

but you're going to deal with the cleaning, the maintenance and and the property basic. The the hard stuff if you're not in it in it. Yeah, oh that's really interesting. Uh, how what are you seeing? Are you still seeing people buy short-term rentals? It seems like things have slowed down.

No, no, no. I Feel like short-term rentals are? they're They're in trouble, Not trouble. But they're not the same as they were. No, no, it's not 2021 anymore.

Yeah, in fact. um. I Talking to someone the other day, the city of Ventura is starting to enforce some of their short-term rental regulations like they they've had the law for I Don't know how many years they never enfor. They never enforce it.

Well, they're starting to enforce it. which darn yeah. Which is you know, going to hurt some people more than likely. Um, because there's a lot of people who are doing them illegally.

Are they going to sell? I Don't know. So we're we're targeting those people who potentially are going to go. Okay, yeah, this ain't worth it. I'll rent it out long term so that's an opportunity for the management company.

but yeah, it's not like it was and you're probably I've seen some of your stuff, you're you're more in tune to that than well. I mean who knows. right? the the end of it all it it seems like uh, as I'm traveling around, I'm seeing a lot of listings come up. I Mean this could just be based on just what I'm seeing, but there are a lot of people who are like why are they selling oh uh, shortterm rentals got banned out here Yeah, you know you're seeing these listings.

Come on the market I'm like oh, that's not good. Well I actually have a story. So we were in C Idaho year or two ago I was just there like a month and a half ago. Oh really? So my wife fell in love with the area and my one of my good friends one of my good friends has like a second house there.

so we're we're all in on the area on the lake or they have like the little Rivers they're on Post Falls close to the Spokane River um which is the town right next to Corane? yep she falls in love She's like I want to be here we need that's closer to Washington We need a place here like I'm like okay, yeah this sounds interesting. like start looking around. Oh I mean it's a destination for that area right? Like okay I'll let's buy a place and when we're not using it, we'll short-term R out people come over from Spokane and even just vacation. Yeah, and uh so I start.

you know, get on air DNA start doing all my due diligence research like expensive man. I'm like this is something's not right here. like I can make this thing work tomorrow like it would even cash flow with us using it part of the time. No.

so I'm like okay, all right, let's start making some some lowball offers right? cuz I mean Idaho is like you. It's where everybody went during the during. now it's where everybody's leaving. So like I'm like we'll start lowballing these people see what happens.

So got one offer, got an offer accepted, and I'm like okay, all right I let's I'll keep doing some research like I'm like, why did they accept my offer Anyway, Yeah, I know D it's so funny you just said that. that line right there is so a real a real estate professional. When you write an offer and then they take it, you're like I overpaid or something's wrong, right? Wait a minute. I was not supposed to get that anyway.

So I start digging in more because honestly, I didn't expect it to happen so fast, right? Start digging in more. End up connecting with this lady who owns a property, a short-term proper short-term management company. I Go! Hey! I Just want your gut opinion here. This is what I'm doing.

This is what all the data is telling me. It doesn't seem right. right? She goes. it's coid data it hasn't flushed through the system.

She goes, take what you're seeing, cut it in half and that's what your real experience is going to be. And right then I was like okay, enough said. So then she gave me the background like, which is to your point Preco: there was like 350 short-term rentals in that whole area blew up to like 1,200 dur fourx. Now nobody wants to go there anymore because everywhere's open.

but prior to that no one was open and people were flocking to Idaho and all the red. States right? So it needs the supply and demand thing needs to shake out. So I pulled out of escro and I go. We're going to sit back and wait and see what happens now now as I'm monitoring it.

There's all kinds of TurnKey short-term rentals that are available for sale and these people are just getting hammered cuz there's too many of them and people aren't coming well. and what's interesting is this sounds crazy maybe. but I think it'll it'll sound right on to you. Maybe.

but a turnkey short-term rental that we have on Airbnb or that people put on Airbnb and then you go visit. It is not like in usually a sailable condition. I Found that a lot of these are really like they photograph really well, but they're really crusty. Oh, they're janky and a bunch of wear and tear.

and yeah, yeah. I agree. Completely So like I feel like you almost have to I Don't want to say re renovate but like go in and renovate some of the renovated short-term rentals to make them sailable. Yeah, I mean and then you're depends on like who you're catering to, like if like there you got some of these that look like uh, you know there's every square inch has something there and they're like not modern and they're like look like you're grandma.

that too did that. So I don't know anyway, but you guys are looking at that area or with the house hacking. so we've We've done so much traveling over this year and I mean from from East Coast West Coast We we've been everywhere and uh, the one place that I was most nervous about uh was Oregon followed by Idaho because those markets were falling this summer while all the other markets were still booming. So you go to Oregon and everything's like that, looks like it should be a good deal.

The comps are here. you know this one's for sale for here. that should be a good deal. but that just kept happening.

so we we we never ended up even writing offers because we we saw this this whereas you go to uh, you know San Diego Ventura County Even parts of NorCal some of the anti-id markets, you're still seeing multiple offers and you're seeing comps that are volatile, but they're still way up from where they were and they're not trending down uh, heavily. at least I Mean now we're seeing a little bit of a softening in the market I Want to see your opinion too, but we're seeing some softening now where it's not like it was in June or July But the prices right now are still a little bit higher than where they were at the end of last year. So where that's not true in Idaho and Oregon. So I got really nervous about those two particular markets.

uh Boise postfalls even to some extent I Saw it a little bit in Washington but not as bad as Oregon Oregon was was rough but then I went to Austin Texas and Austin was booming in the spring. Now everyone's panicking so it's it's a weird time. What do you think? What do we? What do you think? so I don't have any expertise on the sales side I Definitely am pretty tight end on the rental side in our area. Like what are your seller or your owner saying? How do they feel People are nervous? There's a lot of uncertainty, right? So we saw pretty pretty significant softening of the rental market end of: August Okay, which a lot of people would say.

Oh, school's going back. It happens every year. Seasonal for sure it does. but this was more severe.

Yeah, worse. Um, my personal opinion is all the Co money cycled through the markets. People aren't as excited about renting for whatever price they can rent for. Um, people, are you know families potentially are Contracting Like moving with parents versus the opposite of what was happening, right? right? Um, there's unknowns with the economy.

like most people aren't experts in the economy and have the crystal ball, they're just like I don't know what's happening. Nervous: I'm not doing anything I'm not going anywhere. So we saw a pretty significant increase in days on market and then we started seeing uh, rent prices move in concessions those types of things coming down and see, how do you handle this when you're comping rentals and the comps. Are you know, doing one to two months free rent? Yeah, how how do you comp this? Because sometimes that doesn't actually show up in the remarks, but you know what's happening or it shows up in the remarks.

But you do a rental survey in a market like Phoenix is like famous for this I mean I I look at the Phoenix market and I'm like oh, starting in January they're starting to do one two months rental concessions and I'm like okay well then a $2,400 a month property is realistically like 2,000 a month. but you do a rental survey and you just do the class I hate it I Ask agents I'm like oh, send me the coms I look at it. They just send me the on liners like the on line of each and then it's see the average rent is400 I'm like come on, this is like let's get the actual data right. Then you look at the data, it's like rental concession, rental Concession rental.

How do you comp? I mean do are you just comping against the stuff you're renting and what you're feeling? No. So I don't I would say I don't have the analytical talent that you have, but we we comp on our local market knowledge. We absolutely look at what the other properties are doing. but really, there's a certain amount of um, feel to it, right? like.

and the conversations we have with our clients have changed completely. It's no longer you know. Co You could take a picture of the dirt and put any price you want on it and it would rent in two days. That's not the case.

Like you have to price them correctly. And the problem in our Market is you have a lot of self-managing owners who don't understand what's happening and they'll put their property up for $5,000 a month when it's really 3,000. But our clients go look at this house. It's $5,000 a month and it's not renting knowing that there's no way in hell it's going to rent.

So it's definitely changing. Um, yeah, it's softening and mean, if it's changing, if it's softening more than it was. you know, in Prior years, at some point those lower rents have to translate to lower prices. But we haven't really seen this massive correction in pricing.

What's your take I mean that's a million-dollar question, right? Like you figure that out. Um, yeah, no kidding. I don't know. I mean people say it's not enough Supply I Don't But there aren't buyers either.

You know, like You know, what? I'm hearing a lot of right now and I want to see if you're hearing this in management? I'm hearing a lot of agents and it makes me nervous when they all say this but they're all saying relist in Spring Okay, great Well what happens when everybody says I'm going to wait until the spring MH Well now you have a surge of inventory. everybody's going to be rushing. the prices are going to do. Pric is going to have to come down because if rates are still very high in the spring.

but all of a sudden inventory. You know we go from 120 homes on the market in Bentura to let's say you know 2011 style was 400 homes. That's a problem. Yeah for sure.

I mean who knows, who knows, You know I mean we Market to or you know one of our marketing streams is targeted at Realtors half of them AR half. That's maybe an exaggeration. A lot of them don't exist anymore. they're already falling off.

Wow. leaving the business leaving the business I mean I don't know how you could if that's how you support your family and the the sales aren't there like what are you going to do? you got to go do something. so the some of the people that are in our database were taken out cu they're no longer in the business so wow. Any anyhow, that's scary.

What else? What else? House hacking? Oh yeah, so you are going to have. This is yet another side of your business. So this is just part of the management company, not not a new business. Guess yeah.

a new feature of the existing. Uh so traditional house Hacking. Not to be confused with House Hack.com Uh, traditional house hacking. You are going to help owners rent out other parts of their homes? This sounds like a nightmare.

Yes, so yeah. So one of the things we believe in our in at Rencon is like everyone deserves the opportunity to be financially free, right? Okay, so we found that that wasn't actually true like in as you know the Ventur market very well. Like we don't have a lot of people running around buying properties that cash flow and buying you know, multiple propert. This isn't Cleveland Ohio or you know, Kansas City Missouri right? This is a high dollar market.

We don't have a lot of those intentional investors around. No, you buy like one or two like that's already a lot. Yeah, yeah. So the whole financial freedom for our clients in our world was pretty much reserved for people that already had assets or bought properties a long time ago.

It wasn't really translating to younger generation coming up who are interested, a lot of your course members, people who are trying to figure this stuff out right? so that didn't sit well with us. We're like, uh, okay, this is our why, but it's only our why for like the top 20% of Ventura right? So that's kind of. That's kind of BS What can we do? Well, obviously everybody knows the best way to buy a house in a market like ours is if you're willing to be uncomfortable and house hack. Well, the problem is a lot of people don't like to take action or they're fearful of tenants and managing or or financing all the things that you got to do to do that.

There's a lot of fear wrapped up in so we were like we can help these people manage these house hacks. It's not that difficult. The number one thing is it's a management nightmare. You got a bunch of tenants in a in a property.

It's going to be difficult. They're going to fight. They're going to have issues. Oh well, because you had that with I'm imagining I I should let you mention, but you said you bought units in Nashville Toledo Water spraying.

How was managing units? It's it's probably a it's more work Yeah and I wasn't self-managing just for the record. Oh, that's right. that's where you hated managers. Yeah, got it.

Oh okay, okay, that end locally. Um, okay. so anyway the the TR The reason why no professional management company wants to do this is because it's they're afraid of of the tenant interactions and having up all these things right? Well, our business is very organized, very process driven I'm not afraid of that. Yeah, even if we brought on another remote worker whose job was to make sure these tenants were happy and deal with the issues, That's fine.

The reality is though, this is happening with a management company or not, right? Like there are plenty of people who house hack in Ventura already who do it just fine. Like is it a little more work? Sure, But with more work is more reward right? Like if we can get more people to do it then that's a win for us. And not to mention we have a new client we have. You know all those things that go along with that.

But the the part that gets weird for us is when we're going to owner occupy manage a house hack so the owner buys the house, doesn't want to get involved in like renting out all the rooms and dealing with all the stuff around that we step in. Now we're in a spot where we have a client who's also kind of a tenant. so it took us a while to work through that with the attorneys and the management contracts and to get it all buttoned up. But we're We're there.

we're We are rolling it out as we speak so we'll see kind of how it goes. How do you make money on that? I Mean if you rent out a room for 1,200 bucks, you you take you know, 10% I guess I guess there's 100 bucks. Say if you took 10. Well I mean the reality.

Well let's just say you're three-bedroom two bath house. like for 3,000 bucks we make our management fee on it. Well, we rent it out by the room just just solely Renning it out by the room. we're going to make more.

You you know, 1,500 bucks for the master, 11,00 bucks per. This is assuming there's no owner in it I got assuming there's no owner in it. Yeah yeah, yeah, that's true. You will always make more dividing it up, right? So that's one aspect of it.

The other aspect of it is my contracting company is going to get involved in creating more rooms. Oh no. So so we have a formal living room, formal dining room, or a loft or something. I mean I just did that because we got all these kids coming.

We're like, well we turned the former dining room into an office. Then we're looking. We got twins coming. We're like, do we want to move? How about the formal family room? We just turned that into another room.

We're like, but there's a fireplace that connects through the other side box it in. Well what's funny is I did this in my own house when we had our third kid I turned the form of living room into the CR the the nursery. right Exact. So now I'm looking that noise away.

Man looking at my own house which I'm not going to do this but if I moved out and wanted to do the strategy I'm talking about it would produce like over $6,000 in R Oh it's insane. So just taking a three-bedroom two bath and turning into four-bedroom two bath I can now rent that out for Mid fives. Okay, so I I'm I'm very interest. There's more cash flow for the client is why it's enticing for them.

that's true. and if they make more money, you get to make more money. Whether it's you should be charging I Should let you answer this: a higher percentage. So if it's owner occupied, we're charging our standard.

If it's non-owner occupied, we are charging more. See, you should because it's more work. Oh, of course it is. So when the owner's there, they can assist with showings and they're the point of contact for maintenance and some of the management duties they're essentially assisting with just because of the fact that they're there.

This is really interesting because you're going into this environment of that coid money being exp or expiring, evaporating, and by and rents gone up. You know, 30 40% over the last four or five years by going into house hacking. Traditional sense of house hacking where you're renting out the individual rooms I Don't think you're ever going to have a shortage anytime soon of tenants. No, there's more demand.

Yeah, cuz it's the ENT The entry point is lower. Oh my gosh. So we're charging premiums too because we're providing cleaning service we're providing. Wi-Fi We're wait wait wait wait What? You're providing cleaning service for the individual rooms? No for the common areas which is just us coming into the prop cu.

The fear of the of our clients is that's a lot of people living in there. They're going to destroy that house. Yeah yeah, our comeback is we're actually going to be in this house way more than we are in our long-term rentals because we're providing twice a month common area cleanings so our cleaner is in there taking a look around things like that so that we're kind of using as a hedge against the some of the concerns with the strategy. But in the end with softening rental market and we have a client who bought their house in the last couple of years and they're going to be negative if they rent it out.

This has the potential to push them over the edge because if we can show them hey, we can get you 20 to 40% more rent With this strategy, that might be enough for them to hang on to it versus sell it. So I Feel like it's a win-win Um, we're excited about it. I Actually 100% agree that demand for this cohort of tenant is going to Skyrocket because I I Think there's still and we know this? I Mean there's fact around this too. but I think people still have this this higher feeling of net worth because of all this the coid spending but it's tapering.

You know whether it's the market or it's just spending or whatever. And the I think there's a very good chance you end up seeing way more people going back into these shared living environments compared to renting their own property just because everything around us has gotten so much more expensive. Even if inflation goes to zero today, things are still 30 to 40% more expensive than they were in 2019. So so now you have more demand for these properties.

Uh, you can help owners make more money because they're going to make more money renting out the rooms. The question is the management intensity, but you're actually solving for the management intensity by basically living there yourself, with your your vendors, right? Your vendors are there because you're sending in your cleaning service twice a week. once a week, twice a month. I think is what? twice a month? Okay, so your cleaning service is going in every two weeks.

Uh, then you know, Who knows a handy person or whatever comes in once a month. So you have three site visits. Potentially a month on average is what I would guess. Maybe even four, three to four site visits a month? Uh, and how do you? How are you going to handle this potential screening? Like how do you? How do you? go and say oh, I need a 700 credit score on somebody who's renting a room like do you lower your standard What happens? Yeah.

So right now we we have a sliding scale of what our requirements are based on the rent price. So if you rent a $6,000 house, your credit and all your things have to be better than if you're renting a $2,000 studio, right? So it could be something similar along those lines. What's your suspicion like are you just going to kill credit? No. I mean we'll have a standard but my it will be lower.

okay for sure. So the reality is too is well go ahead. I'll let you finish this L 500 No no no no, our lowest right now absolute lowest is 640. Okay, oh that's like FHA yeah I could see maybe a little bit lower than that or something.

I Haven I haven't like worked all there are two there Are you heard of Padit? Uhuh Padsplit is a a venture backed company that's doing this in other Market not in our Market But their argument is they I Don't know if they disregard credit completely, but it's less of a factor in their criteria and they have like I think a 97% collection rate or something I don't know how accurate their data is, but the argument is made that it doesn't matter as much. Not to mention with the political environment we have in California Yeah, I wouldn't be surprised if credit score as a requirement goes away completely. Um, hopefully we? that doesn't happen, but it wouldn't surprise me. It would create certainly some more challenges I wonder if if because what I'm seeing in some of the markets where they've gotten rid of credit scores is they still allow you to run a credit report? Which that's actually what I care about more is I want to see the history? Are you paying your freaking phone bill? You know stuff like I want I want to see that payment history? but if they completely disallow that I Guess what you'd have to do then is send me your last 12 uh statements for your uh phone bills and stuff like that.

You know the other piece of this that's good for the client is we now have a single family house that is that is performing more like a multif family unit. Yes, so you're not going to have the turnover where you don't collect rent for a month and you have $5,000 to get it ready to rent. That's not going to happen because not everybody's going to move out at the same time, you're going to have one turnover Which the worst case scenario out of a room is you replace the carpet and paint the walls right. Like not anything compared to you have to do that for the whole house so it's going to stabilize the cash flow for the client.

Which do you think you'll have more evictions I don't know. Yeah that I think as long as we follow our screening criteria that we're going to be in good shape like I mean if I look at our eviction record right now. in the in the last 10 years people we've evicted because people that we've placed right? I think four. That's nothing.

So we've evicted many more people. but they're people that bring problems to us. Yeah and that's not your our record. Yeah so I mean like I've never had a an eviction on any tenant that we've ever placed.

but my first real estate deal ever. First deal ever. Here's six units 309 East Thompson Boulevard uh please don't evict us. The fair is coming up and everybody loves the fair.

Those people had every excuse Under the Sun not to get evicted and they were so toxic for for that entire building I couldn't sell that building for 11 months cuz of them. Yeah so oh evictions suck Man it makes the whole building smell. it sucks literally too in that case. Ah anyway so this is really interesting.

so have okay have have you done this room renting before? No, we're rolling it out so we've had I've had are you scared I mean this is no, not at all really. I've analyzed this every which way from Sunday I've worked with our attorneys I've talked to there's this is very similar to student housing. It's not is basically what it is. It's not that much different.

and I have a colleague or two that do that do student housing on a regular basis. Intense. What do you mean colleague, other management, company owners in other areas? Yeah, so I Network pretty well with people like me across the country. Okay, so basically the people because I've posted this in some of the groups I belong and gotten a lot of hate.

You're out of your mind. it's going to be too hard. and then the people that come to me like behind the scenes are like yeah, don't worry about any of that I'll show you how I do do it. It's not that big of a deal.

So the way our software set up the what's that it's a moat. When other people are like that's too hard. Don't do it which is an opportunity. It's an opportunity.

It's insulation for you. Yes, you're right. it's too hard. You know it's kind of like you're right.

California sucks. Do not move to Ventura It's a horrible place to live and like this place is freaking a yeah oh that's interesting. Okay, uh so wow. that is really interesting.

So so you're not like the Eminem So I'm not afraid, you're you're you're just gonna go all I Mean there's going to be challenges for sure. What do your attorney say about this? Is it legal to just chop them up So there are some regulations? Well when you say chop them up, what do you mean like add more rooms? Yes, but only with permits right? They have to fire C Like there has to be a window. There has to be an exit. All those things like we're not talking about doing this without permits I'm not going that.

but I mean if you just pull up a wall and there's already a window, do you really need a permit? So the reason I want the permit is for a couple things. one just the C but two I want the public record to change. so if this owner, our client in the future refinances, sells reappraises it Now instead of a three-bedroom it's a four-bedroom but you're not getting paid at all for that work that you're doing that like oh no we absolutely are getting paid the the to pull the permit. Well my Contracting Company yeah we we line item everything I guess I guess my like I'm I'm just thinking a try.

Have you pulled any permits yet for your clients? Yeah well for the Contracting side Sure. Okay okay how do you deal with the uh you know. Oh here comes the inspector and you're pulling an inspection for you know, smoke detectors, carbon monoxide, uh, bedroom ceiling fan and there's the egress right now. We put the door in, we put the non non-bearing retaining the wall in.

whatever, how do you deal with the inspector Hm new windows. We'll need a permit for that. Oh look at that new water heater. We'll get one for that.

Oh you guys have an addition here from the' 70s you know I Don't see that on the the record here. Let's get a how do you deal with that I mean I Will say this: This happened to us on our last project. what are you going to get to Man, it wasn't a big deal it was. You got to tear down additions sometimes.

Yeah, well in this case it was the the the inspector was didn't have it figured out because he's like yeah, that's not permanent I looked send my people over to the office. hey this is what they said The person behind the desk oh actually that was pered in 1955. Here's the permit. You got lucky on that one.

got lucky on that one. but you're going to get sent to that office all the time there. There's risk here and like if if we well one I don't actually manage properties if there's like known unpermitted structures. no that makes sense.

but I'm I'm thinking like do you need a permit for a a a non-load bearing wall I don't think You' do. but if you're going to put like electrical in or yeah, you put a new outlet on there or whatever and that's not an expensive permit I Guess what you're saying is look if you have like, if you have a 2002 home home with no funky additions, what are you afraid of like pull the permit. It's it's going to be like 80 bucks for an electrical permit in the drywall and the W big deal. and it's a Cya for the owner and for us like I don't want to get involved in renting out something that's unpermitted if for some reason it was required, right? But the regulation that does apply here is the cities have certain rules against like boarding houses which is what some of them look at this as okay.

so tell us for example: Camario doesn't allow boarding houses. so in theory we shouldn't be doing this in Camaria, which you know I don't anticipate having an issue. but there are some cities that expressly prohibit this in their codes which are Antiquated and but that's a whole another conversation and those might loosen a lot in this sort of uh, environment that we're we're uh, in where affordability is a big issue. a huge issue.

Oh yeah, that's really fascinating. So okay, and I guess that makes sense because you don't want even insurance issues in the future either. Uh, with for me, it's like a liability like you did. You did unpermitted work on my property and now XYZ happen.

This is your fault. Yeah, and a lot of rental renovation stuff doesn't require permits like I I've I've gone to the city before I'm like, look, we're just replacing the ceiling fans and life fixtures and the faucets in the same location. They're like don't even bother yeah, which technically via the book, are you supposed to? maybe But when the people at the counter or or the inspectors are like don't worry about it uh, that's great but uh, but that is, you're right. I mean really, how hard is it to permit stringing up a wall If we're and and we're not and if if we see a house that's like obviously had 15 additions to it since the 1905 or whatever, probably not going to recommend that strategy to them or we're going to have the conversation like this is the risk here.

Yes, are you comfortable doing this because interesting. Anyhow, so uh, where else have you seen these? What other room rental restrictions have you seen? So as far as when we were doing our our research, that boarding house thing is the main one that was it. Yeah, the the city of Oxnard which isn't necessarily against rent by the room, their rent control just cause measure is by the door that's rented. So In theory these for sure going to be covered under their rent control law.

Yeah, but those are not that hard because like like that's usually like what they're trying to protect against is a homeowner moving in and trying to like remodel the whole building. It's not going to stop strategy, just just a consideration. But as far as people saying no, you can't do this. The only one I'm aware of is these boarding house regulations that's really interesting.

Okay, okay yeah and and I mean that's easy to find out. you just walk into the city restrictions we already. we talk to every city in Ventura County and any City you invest in, you should go talk to the city. Even just to shake their hands, it's a great idea.

Okay, wow, that's really interesting. Um wow. uh I Never thought that a property manager would desire to do what you just said. but the problem with this is you're not just any property manager.

You're like the property manager I respect and like love and admire. So like I'm like this is this is like a mind twist like I I'm going to have to tell I'm going to tell Lauren about this. she's like what they got to Peter Well the reality is, most manager companies suck, right? lack of a better term? That's why we're like what? and I have my own theory on why they suck. But yeah, well tell us about that.

So our the business is structured in a way that breeds apathy. So like yeah, you come to me, you go hey I want you to rent my house out Okay, okay I'll rent your house out I control the money I control when I get paid. The only recourse you have against Me Is You can fire me or you can like file a complaint with a Dr that's it. So if I have 2,000 properties that I control when I get paid I don't really care if you fire me or you you're unhappy because I have 19990 way.

Other that that do, it's backwards if it flipped and it was like you as the client have to pay me each month and I have to invoice you. it would change the industry completely because all of a sudden I would have to really work hard for you to pay me and you wouldn't pay me if I did a terrible job or I screwed up a maintenance thing or I overcharged you or let your tenants not renew their lease or made whatever it is right that that's I think one of the reasons it's so bad. The other reason is property management at Scale is incredibly. it's simple, yet complex.

Yeah, because if you manage one property on your own, Easy you could do that in your sleep. You manage a thousand the exact same way you need process. You need structure, You need people, You need technology. You need all of those things.

And that is where a lot of people get into trouble. Like because most property management companies were born from realtors in the sales world who are who kept getting asked by their clients. Hey, manage my property, manage my property. And then all of a sudden they find themselves with a portfolio.

They don't care about property management. they're viewing it as a lost leader to keep those clients. In essence, though, they have a train wreck dumpster fire going on in this management company that every that has a terrible reputation. That's where most management companies across the country came from.

So there are like a new breed of people who are looking at it differently. who I consider myself one of those people who are treating it like a business who I don't come